Gold prices slid as the planned signing at the White House on Wednesday of the Phase 1 trade deal dampened both the appeal of safe-haven bullion and the Japanese yen, which dropped to eight-month lows.
MSCI's all-country world index and shares on Wall Street set intra-day highs before the S&P 500 and Nasdaq backed off a bit as investors said the long-awaited deal was priced into the market. Stocks in Canada and Australia also surged to records.
Stocks on Wall Street fell after Bloomberg reported that existing U.S. tariffs on $360 billion of Chinese imports will likely stay in place past the U.S. presidential elections in November as Washington reviews compliance with the trade pact.
Investors fear the global economy may not turn up enough to lift corporate earnings and share prices if tariffs remain in place for most of this year, said Jim Paulsen, chief investment strategist at the Leuthold Group in Minneapolis.
"People thought the tariffs would come off, the arguing would quit and manufacturing would restart across the globe," Paulsen said.
The contentious trade talks cast a pall over the market for much of 2019 until signs a deal was in place late last year helped lift Wall Street to a string of successive record highs.
The Trump administration apparently would like to retain leverage over China to enforce the trade pact, Paulsen said, while noting that tariffs are just one factor affecting world growth.
"But certainly it's worth a trading headline in the afternoon," he added.
Details are slowly emerging about the deal. China has pledged to buy almost $80 billion of additional manufactured goods from the United States over the next two years as part of a trade war truce, a source told Reuters on Monday.
China would also buy over $50 billion more in energy supplies and boost purchases of U.S. services by about $35 billion over the same two-year period, the source said.
Kristina Hooper, chief global market strategist at Invesco in New York, said she doubts China's purchase of manufactured goods will reach anywhere near $80 billion. Also, China has substituted agriculture products from other countries since the trade war began, in particular Brazil, she said.
"The reality is that China has been wary about making specific purchase commitments for some time," Hooper said. "I don't see China abandoning Brazil and ramping up purchases of U.S. goods so dramatically," she said.
MSCI's gauge of stocks across the globe <.MIWD00000PUS> gained 0.01%, while the pan-European STOXX 600 index closed up 0.29%.
On Wall Street, the Dow Jones Industrial Average rose 32.62 points, or 0.11%, to 28,939.67. The S&P 500 lost 4.98 points, or 0.15%, to 3,283.15 and the Nasdaq Composite dropped 22.60 points, or 0.24%, to 9,251.33.
Overnight in Asia, Japan's Nikkei <.N225> added 0.7% to hit its highest level in a month. Australian shares rose by the same margin to close at a record.
Hong Kong's Hang Seng and Shanghai blue chips <.CSI300> hit multi-month peaks before running out of steam.
China's yuan was slightly weaker after earlier hitting a high last seen in July. The U.S. Treasury Department on Monday reversed its designation of China as a currency manipulator in what is seen as a conciliatory gesture before the trade deal is signed.
The dollar index rose 0.04%, with the euro down 0.06% to $1.1126. The yen weakened 0.03% versus the greenback to 109.99 per dollar.
Global oil benchmark Brent crude rose as the trade deal marks a major step in ending a dispute that has cut global growth and dented crude demand.
The trade dispute had a tangible impact on global oil demand last year, said Tamas Varga, an analyst at broker PVM. Varga pointed to 2019 demand growth of 890,000 barrels per day, compared with initial forecasts of 1.5 million barrels per day.
Brent crude gained 29 cents to settle at $64.49 a barrel and West Texas Intermediate crude futures rose 15 cents to settle at $58.23 a barrel.
U.S. consumer prices rose slightly in December even as households paid more for healthcare, and monthly underlying inflation slowed, supporting the Federal Reserve's desire to keep interest rates unchanged at least through this year.
Tuesday's weak inflation report from the Labor Department followed data last week showing a moderation in job growth in December. Economists said these developments were flagging a sharp slowdown in domestic demand.
Benchmark 10-year notes last rose 10/32 in price to yield 1.8126%.
U.S. gold futures settled down 0.4% at $1,544.60 an ounce.
By Herbert Lash
